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Africa: aviation special report

Is Africa finally about to liberalise its air services to create much-needed new routes and added competition?

Whisper it quietly, but 2017 could be the year that Africa finally takes a big step forward with the opening up of air travel around the continent. This could help to bring to an end the often tortuous routes that business travellers have to endure when flying within Africa.

The Single African Air Transport Market (SAATM), which is one of the flagship policies of the African Union and African Civil Aviation Commission (AFCAC), is due to be implemented this summer. SAATM is designed to operate in a similar way to the European Commission’s Single European Skies framework and should – in theory – open up more competition and routes across Africa, as well as bringing airfares down.

So far, only 17 countries out of the 55 African Union members have signed up to take part in SAATM, but thankfully this does include most of the continent’s biggest economies – Nigeria, Egypt, South Africa, Ethiopia and Kenya. There are also hopes that more African nations will sign up in the near future.

There are some high expectations for the impact of SAATM, with AFCAC claiming it will “bring about enhanced air connectivity, traffic growth within the region, higher rates of utilisation for existing airport facilities, increased employment, and increased socio-economic benefits to the continent”.

Opening up Africa’s skies

The potential benefits for Africa of air route liberalisation could be huge for the continent’s economy – a study by Intervistas found that opening up flights between 12 key countries in Africa could provide an extra 155,000 jobs and add US$1.3 billion in annual GDP.

The International Air Transport Association (IATA), which commissioned the report, adds: “A potential five million passengers a year are being denied the chance to travel between these markets because of unnecessary restrictions on establishing air routes.”

IATA predicts that SAATM will have an “immense impact” on African aviation if countries successfully implement it. “For a start, a greater percentage of intra-African air services would be carried by African airlines,” it says. “We will also see more direct connections, which will greatly reduce the long travel times we currently experience when getting around this vast continent.

“Furthermore, air services liberalisation will lead to increased capacity, which will result in lower fares for the benefit of all consumers.”

While this all sounds promising, most aviation analysts and those working in business travel are adopting a “wait and see” approach because developing “open skies” within Africa has seen plenty of false starts over the last couple of decades.

The biggest failure has been the marked lack of progress in route liberalisation since the Yamoussoukro Decision was signed by 44 African nations in 1999. This agreement was supposed to open up the continent’s aviation market but only a few countries, such as Ethiopia and Kenya, have followed through on this in any significant way.

“There has been an acknowledgement of the need for liberalisation to help air transport grow across Africa, with the economic benefits that provides for many years,” says Patrick Folley, a director at London-based aviation consultancy Consilium Aviation.

“Unfortunately many nations subsequently chose not to put Yamoussoukro into effect, often in order to protect small, weak national airlines with little prospect for growth.”

African aviation also continues to be dogged by poor profitability, patchy safety standards and high airport charges, which kept prices high. African airlines also have to pay around 2.5 times more on average than other carriers for their fuel – a problem that has been further exacerbated by the current strength of the US dollar against local African currencies.

“The far-sighted vision of a Single African Aviation market will help spur the development of African aviation which currently accounts for less than three per cent of global traffic,” says Elijah Chingosho, secretary general of the African Airlines Association (AFRAA).

“Significant progress has been achieved towards a single aviation market. Those states that have embraced liberalisation of their skies are realising significant economic benefits,” Chingosho adds.

The 2015 Intervistas report on air service liberalisation in Africa illustrates the potential of airspace liberalisation by highlighting how some African countries have already benefited through enhanced bilateral agreements.

For example, a deal between South Africa and Kenya in the early 2000s led to a 69 per cent rise in traffic between the two countries, while allowing low-cost carriers to fly between South Africa and Zambia cut fares by nearly 40 per cent and increased passenger numbers by a similar percentage.

Business boost

The potential benefits for business travel are obvious with more convenient routes between key African destinations to choose from as well as lower prices through increased competition. Currently, travelling between some African destinations involves flying via the Middle East or even into Europe and back again.

Frank Palapies, chief operating officer, Africa & Middle East for Wings Travel Management, says: “Many passengers a year are being denied the chance to travel within Africa because of unnecessary restrictions on establishing air routes.

“With the impending opening of air traffic in Africa, it will make air travel more affordable to more people and stimulate traffic flows between various countries. The open skies policy will allow us to provide more travel options for our customers, facilitating direct flights and budget savings.”

Ciaran Kelly, general manager, Middle East & Africa at FCM Travel Solutions, adds: “We have seen promises about liberalising the African skies before; if African countries opened their skies, they would be able to create thousands of jobs and add billions to their gross domestic product each year. Greater competition would also lead to more people being able to afford air travel.

“If aviation is more accessible within Africa it leads to greater efficiency and productivity and it creates opportunities for a country’s citizens. Poor connectivity is losing Africa lots of opportunities for growth,” adds Kelly.

The importance of business travel within Africa is underscored by research from the World Travel & Tourism Council (WTTC), which shows that the biggest percentage growth in business travel over the last five years came in the Democratic Republic of Congo, while Mozambique, Sudan, Angola, Rwanda and Ivory Coast also featured in the top 15 countries globally for corporate travel growth during this period.

Those countries forecast to see the biggest increases in business travel in the next ten years include Rwanda, with an average annual rise in spending of 8.5 per cent, while Gabon and Tanzania also feature in the top ten growth markets up to 2027.

Financial weakness

On a commercial basis, something needs to change for the continent’s aviation sector. African airlines lag behind their counterparts in other countries in terms of their financial performance – collectively they made a loss of US$800 million in 2016 and a similar deficit is expected this year. Profitability has not been helped by “inadequate” load factors, says IATA – currently the lowest in the world at a meagre 50.8 per cent.

The traditional knee jerk reaction by African governments to their struggling state-owned airlines has been to prop them up financially or try to deter competition in some way. Nigeria’s government took over the running of the country’s largest carrier, Arik Air, in February to prevent its failure.

But endless unprofitability does not have to be the norm – Ethiopian Airlines is a rare shining light in the African industry with a record-breaking profit in 2016 and plans to increase its range of destinations from 98 to 120 by 2025, plus the tantalising prospect of a new airport in Addis Ababa. (see panel, below)

For AFRAA’s Elijah Chingosho, the aviation industry is at a financial crossroads in Africa. He says: “To reverse this state of affairs, the quest for a Single Aviation Market should not be allowed to fail. Failure would result in the African airline industry following the footsteps of the once thriving African shipping industry which has now virtually disappeared.”

Future prospects

So what should we expect to see in the near future following the implementation of the SAATM? Encouragingly, the six nations that make up the East Africa Community (Burundi, Kenya, Rwanda, South Sudan, Tanzania, and Uganda) were due to meet to discuss the “fast track” implementation of a liberalised single air market within their region.

But not everybody is holding their breath about a sudden surge in new routes across Africa during the next few months.

John Grant, senior analyst at aviation data firm OAG, says: “It will probably only help speed things up a little, if at all. Will it allow cross-border ownership or open skies type agreements?

“Those that combine conducive geography and the ability/willingness to capitalise on it may benefit – Ethiopia and Ethiopian Airlines spring to mind, maybe also Morocco and South Africa.”

Consilium Aviation’s Patrick Folley says: “Within many African nations, the percentages of the middle classes that can afford to fly remain relatively low compared to the rest of the world. This means that potential route opportunities can often be only for relatively small numbers of people, justifying infrequent service.

“Liberalisation may allow more successful airlines from other parts of Africa to introduce services that aren’t reliant on purely flying to their home country airport. A good example of this already has been the development of ASKY by Ethiopian Airlines as a west African airline based in Lome [Togo].”

A more optimistic view comes from Ali Tounsi, secretary general of ACI (Airports Council International) Africa, who says the “writing is on the wall when it comes to liberalisation in Africa”.

“It works and it works on a number of levels: from helping to grow the industry to bettering countries’ economies,” he adds.

Perhaps travelling between some parts of Africa will no longer be such a logistical nightmare for business travellers – we will have to wait and see whether ‘open skies’ becomes a reality or whether this is just another false dawn.

Airport developments

Here are details of some of major airport infrastructure projects in the pipeline across Africa:

AccraKotoka International airport in Ghana is due to open a third terminal in early 2018 adding an extra five million in passenger capacity.

Addis AbabaThe Ethiopian capital’s Bole International airport is currently expanding its two terminals, as well as adding a ‘VIP’ terminal. Work is scheduled to be completed by January 2018. There are also plans for a new US$4 billion hub airport in the city which would have annual capacity of 12 million passengers. The new airport is expected to take up to eight years to build.

Cape TownSouth Africa’s second largest gateway is set for a major upgrade, including the realignment of its runway and taxi-ways so it can cater for larger aircraft, such as the Airbus A380. Work is due to start this month (July) for completion by late 2021. A new domestic arrivals hall is also scheduled to be completed by 2020, while a second terminal is set to open in 2022.

DakarBlaise Diagne airport, around 50 kilometres from Senegal’s capital, is due to open later this year after taking more than a decade to build. It will have a capacity of 10 million passengers per year.

JohannesburgSouthern Africa’s major international hub, OR Tambo, is planning to refurbish its international terminal with work scheduled to run from 2018 to 2020. The airport will also construct new stands for larger aircraft, such as the A380.

KigaliWork has started this summer on the new Bugesera International airport in the Rwandan capital, which is scheduled to open at the end of 2019 when it will operate alongside the existing Kigali International airport.

LusakaA new terminal is currently being built at Kenneth Kaunda International near Lusaka, Zambia, as part of a US$360 million expansion and improvement of the airport. Completion is expected in 2019.